tv Nightly Business Report PBS February 18, 2012 1:00am-1:30am PST
>> susie: working americans will continue to see money in their paychecks. congress finally gives the okay to extend the payroll taxcut. the dow jones industrial average continues its march to 13,000, but can it continue to rally with corporate profits losing steam? it's "nightly business report" for friday, february 17. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. good news for 160 million working americans: congress voted today to extend the payroll tax cut. both the house and the senate passed the measure. and tom the president is expected to quickly sign it into law. >> tom: susie, the bi-partisan deal ends an intense political fight. here are the specifics of today's measure. the bill extends the current 4.2% pay roll tax cut through the end of 2012. without the deal, payroll taxes would have shot up to 6.2% on march first. also unemployment insurance benefits were extended for the rest of year. the deal also includes the so- called doc-fix avoiding a 27% cut in payments to doctors who serve medicare patients.
>> susie: our washington bureau chief has been following the story and joins us now. nice to have you with us. >> good to be here. >> susie: all right, so so much debate on this topic. so how much does this help the economy and how much does it hurt the deficit? >> reporter: well, a few deficit hawks, the budget hawks are very vocal crew, but they are often ignored. they're complaining today that this has 90 billion dollar to its deficit. now if you have got 15 trillion dollars in national debt you might say 90 billion dollars, hey, that's not that much. but the deficit hawks are saying the signal it accepteds is that both parties joined hands and ignored the deficit. so that's their certain. on the economy it's probably best thought of as an insurance policy. it helps out. >> susie: well, how does it help consumers? i mean with more money in their pockets, will this tax cut make consumers more confident? will they spend more? >> reporter: really well, susie, how are you going to
feel if you don't have to hear the headlines and we don't have to sit here every night saying congress is debating whether or not to give a tax cut. congress might not do it, they're going to the last minute. i think for consumer confidence, a lot of this is probably related to the fact that they're not hearing about dysfunction in congress. they're hearing that congress is getting something done. it's going to help them so i think that's probably a large part of impact on consumer confidence. >> susie: now i know you have been talking to a lot of economists as you have been reporting on this story for months now. what are they telling you about how this payroll tax cut, you know, will impact the economy? what does it mean for the economy? >> you know, it's kind of mixed there are some economists who tend to be on the more conservative side and say hey look t would have been better to give this to people in a lump sum that people would notice in their paycheck as opposed to drips and drabs, that's one few. the other few is that basically this does no harm. if you had taken it away, mark zandi at moody's an
letic says it would have been about a .7% hit to the economy. now just as the senate passed this, i was sitting down to speak with the president's economic advisor alan krueger and i spoke to him today. and we talked about this subject. got his thoughts on this tax cut and other economic issues. >> i think it provides very important insurance. so for example, last year we saw increasing gasoline prices. and the payroll tax cut helped to offset that. and it helped to continue the recovery. i think it's important that we take all the steps we can to continue the momentum that the economy has had over the past few months. >> you mentioned oil prices. let me follow up on that, because obviously there over $100 a barrel, pretty high. and last time oil prices were blamed for stopping the momentum the economy had. are we seeing this movie again? >> well, if you look back over the course of the last
year, one of the headwinds that the economy faced was the increase in oil prices because of turmoil in the middle east. and price of gasoline is very important it has a big effect on family's budgets. it's hard to substitute away at least in the short run from gasoline. so that's one reason i think it's very important that congress did continue the payroll tax cut. the typical family will now have $40 in extra after tax income to help offset such a shock if we have that occur. >> reporter: well, how much of a shock are we having now because oil prices are over $100 a barrel. >> you know, the economy has been resilient. and the job growth has picked up the past few months. normal pattern is that gasoline prices rise in the summer. i think that doesn't make it any easier to cope with higher gas bills. offsetting the increase in oil has been a mild winter
which has been helpful. and if you look at spending on heating optimism and electricity over the past few months, that's been restrained because of the warm stream that we've had. >> so the economic report of the president is out today. what kind of recovery are you anticipating? >>. >> well, we have a recovery, if you look at the job market, that's hugging pretty close to the recovery that we had in the early 1990s. and despite all the problems that the economy faced, all the problems that built up over a period of years, decades in many cases, we are digging our way out of the deep hole that the recession created. and i think one can take heart in the fact that we are on a path that so far has been similar to the path in the early 1990s. >> reporter: let me ask you, you also talk about europe in the report. right now there is a debate going on in europe of whether or not greek default would be all that bad. whether it would be a lehman
brothers event or whether the system could tolerate it. the administration worried about this kind of debate that europe seems to be flirting with another leeman like event? >> sure. the administration is very much engaged in development in europe. we continue to believe that the european euro area, the european union has the capability to address their problems. they're making efforts to address their problems. and it's important that they continue along those lines. >> reporter: alan krueger, the chairman of the president's council of economic advisors, thanks for your time. >> thank you, darren, pleasure. >> tom: still ahead, china's next leader traveled from washington dc to los angeles this week, but we catch up with china's vice president xi during his stop in the mid-west. >> tom: inching towards 13,000, the dow spent the day trying to get there as investors were optimistic we'll soon see a greek debt deal. the industrial average rose 45 points, but the nasdaq lost
ground falling eight points and the s&p gained three. for the week, it was a reversal of fortunes for the major averages. the dow gained almost 150 points or more than 1%. the nasdaq jumped 47 points or nearly 2%, moving higher in three of the past five sessions. and the s&p 500 added 1.4% this week led by thursday's big rally. >> susie: the recent rally in stocks has come despite a slowdown in profit growth. 80% of big name u.s. companies have turned in their quarterly numbers and the results are just so-so. and, profit growth is expected to weaken further this year. suzanne pratt takes a look and what that could mean for the stock market. >> reporter: a funny thing's been happening on wall street this year: earnings growth has been stumbling, yet stocks have been moving steadily higher. in fact, fourth quarter profits for s&p 500 firms so far are up only 9%. at the start of the quarter,
analysts believed they would be 15%. 9% isn't awful, but it's mediocre when you consider s&p 500 earnings growth has averaged 24% in the last two years. earnings expert john kozey says the problem is firms are running out of ways to slash expenses. >> the earnings growth slowdown is more of the result of the fact that companies have squeezed as much as they can out of operating margins. it's harder to get that next quarter's worth of efficiencies when you've just cut and made cuts in the past. >> reporter: in the immediate future, the earnings picture is likely to darken further for corporate america. for the quarter that ends march 31, profits are only expected to be up 2% from the year before. for q2, analysts are looking for an 8% gain. so that takes us back to the stock market, which seems to be ignoring the slowdown. some market pros worry investors will soon wake up to the new earnings reality. strategist wayne kaufman
disagrees. he says investors are focused on the second half of the year, when profits are expected to improve. >> growth for 2012 into 2013 is expected to be 12%. so, that would support a market valuation. right now market valuation is 13 to 14 which historically is actually low. so, it's definitely not overvalued by any stretch of the imagination. >> reporter: there's no doubt that corporate earnings matter a lot to the u.s. stock market. the question is what matters more: today's profits or tomorrow's? suzanne pratt, "nightly business report," new york. >> tom here at the big board all the traders have their eye on the index. it's just 50 points away, the dow jones industrial, 50 points away from that. psychologically important 13,000 level. a lot of optimism going into this long weekend. we'll see what happens next week. >> tom: that's whispering distance to that
psychologically. you don't even have to shout to get to 13,000. >> susie: absolutely right. >> tom: let's get you rolling with tonight's market focus. blue chip stocks drifted higher ahead with tech stocks lagging behind. the dow industrial's goes into the long president day weekend just below the 13,000 mark. it's the dow's highest close since may of 2008. the top broad market sectors were consumer discretionary stocks, financials and telecommunications, but each gained less than 1%. while technology has a group was weak, intel was a stand-out stock to the high side. intel's 2% rally led the dow industrial average and the buying came as volume almost doubled. intel stock is at its highest price since late 2007. we saw split fortunes for some household food makers.
soup and ketchup were hot. cereal, not so much. campbell soup's last quarter was better than expected even though sales were down from a year ago. higher prices for soup did not make up for slower sales. but the company stuck to its 2012 outlook. meantime, heinz beat wall street estimates by a dime per share. heinz was successful in raising prices without cutting into its global sales volumes. but north american sales were down. campbell shares were up more than 2.5%. heinz jumped 4.5%. but general mills cut its forecast over weaker sales volumes in the u.s. it's new forecast is about 10% under what wall street anticipated. shares were hit, losing more than 3.5%. volume quadrupled with the stock dropping to its lowest level since november. on tuesday's n.b.r., we will have an exclusive interview with general mills c.e.o. ken powell talking about the challenges of higher commodity costs and price
competition for consumers. speaking of commodities, energy prices continued heating up with oil continuing to climb over $100 per barrel. oil added almost a dollar today, selling at $103 and change. this is oil's highest level in nine months. just this week oil gained 4%. more signs of a strengthening u.s. economy, progression toward the latest bailout of greece and tension with iran have added to price pressures. but higher pump prices is not deterred department store macy's from putting out the help wanted sign. the company announced it would hire 4,000 full time workers this year, including store managers and buyers for its online business. macy's expects to sell more than $2 billion worth of merchandise online this year. shares jumped almost 3%, putting it just shy of its 52 week high hit two weeks ago. after a sharp rally this year in gilead sciences, the stock plummeted today dropping 14%.
investors have been bidding up shares as it continued its $11 billion buyout of phamasset, picking up an experimental hepatitis "c" treatment with big potential. but data today on the medicine indicates some patients taking it relapsed after the treatment ended. those working on alternative hepatitis "c" medicines got a boost from the gilead disappointment. vertex jumped more than 4.5%. merck's stock added 1%. both of their medicine's received approval last year. finally, lin-sanity continues. the excitement around harvard economics graduate and now start new york knick's point guard jeremy lin may have helped get knick games back on time warner cable. time warner had been in a fight with madison square garden over what time warner pays to carry the m.s.g. network. m.s.g. shares continue hitting new highs thanks to the lin- sanity excitement. and time warner cable finished at a seven month high. and that's tonight's market focus.
from iowa public television andrew-- reports. >> reporter: this was a return visit to iowa for xi jinping. but times have changed significantly since his visit in the mid 1980s for the agriculture economy and the business between america's farms and china's kitchen tables. for midwestern growers, the rising demand from china shows few signs of cresting anytime soon. over the past decade chinese purchases of all iowa commodities have skyrocketed, from less than $25 million in 2009 to nearly $600 million in 2010. >> how do you read market signs and signals? >> that is probably the toughest part of farming-- to market our crops. >> reporter: iowa corn and soybean farmer rick kimberely hosted the chinese leader and his 2,000 acre operation. he believes the asian power is a premiere buyer of u.s. grain
today and well into the future. >> to give you a little background, exports-- we export 55% of the soybeans that are grown in the nation, not only in iowa but in the nation. and 60% of that number if exported to china. so that is a huge number. >> reporter: in 2011 the multi- billion dollar chinese market surpassed canada to become the top destination of u.s. farm exports. but american officials caution the agricultural sector against relying solely on trade partner for growth. >> but you still have to have a diverse portfolio. you don't want to be over reliant on one customer because that one customer could pull the rug out from under you. >> reporter: but for now china is rolling out the welcome mat for food grown in america. during xi's visit this week, china signed agreements for the largest soybean deals ever made in a single foreign visit offering another sign of china's big appetite for u.s. grain. andrew batt, "nightly business report," des moines, iowa. >> susie: dreamworks animation
is heading east, far east. the creators of animated films like "kung fu panda" and are partnering with two chinese media companies. oriental dreamworks will launch in shanghai later this year developing and producing animated ams. dreamworks will owt venture. "kung fu panda 2" was china's highest grossing animated film last year. >> tom: here's what we're watching for next week. our market monitor guest is alan lancz, editor of the lancz letter. on the economic calendar, january's new and existing home sales and earnings from wal- mart, macy's, j.c. penney and target. monday, with the markets are closed for presidents' day, we bring you conscious capital-l--a look at businesses big and small, doing well by doing good. >> susie: more headaches for tylenol maker johnson and johnson. it's recalling all versions of its infant tylenol because of a packaging problem.
the newly re-designed bottles hit store shelves in november. they were supposed to make it easier to measure doses of the medicine. but customers complained a syringe within the bottle was breaking off. today's recall covers half-a- million bottles. j&j has had over 25 recalls since 2009 at an estimates cost of a billion dollars. >> tom: you've heard of fake italian handbagshow about fake u.s. bonds? italian police today seized $6 trillion worth of phony u.s. treasury bonds. that's a face value of more than a third of the u.s. national debt. they were found in switzerland. eight italians were arrested and charged with international fraud and counterfeiting. italian, swiss and u.s. authorities have been working on the case for over a year, after learning of a plan to use the fake bonds as collateral to secure loans.
>> tom: a slow growing economy isn't necessarily bad for stocks, just look at today's close at two and a half year highs. but tonight's market monitor is also playing some defense. brian lazorishak is portfolio manager at chase investment counsel. he joins us from charlottesville, virginia. nice to see you, thanks for having me, tom. >> tom: we've seen a sharp rally this year, a sharp rally in small mid cap and big cap since october. have the downside risks increased with this rally we've seen? >> well, i think you have to
pay attention to the downside risks. we think there may be room left to the upside. but one of the things we do with our fund is always pay attention to the downside and try to manage those risks too. >> tom: you manage the risks at a time when we are seeing eerntion growth slowdown for the broad market. does that concern you? >> well, it's a little bit concerning for the broader market. but i think we're still able to identify plenty of stocks that have strong and in some cases even accelerating earnings growth. so to the extent that we can focus our stock on the right areas we should have success. >> tom: you have the stock picks with us to consider beginning with dollartree, the low cost retailer. and it has had one heck of a rally over the past year, below 50 to tonight, almost $90 per share. we've got to ask, dollartree, as it operates in this low end retail space, does the stock have much room to run after this big rally? >> dollartree has been a big
form performer for us but we do think it has room to go. they continue to excaught very well. dollar tree has about $44-- 4400 stores selling everything at a dollar. they continue to grow their store base. and we think if they can continue to grow square footage at about 5% a year, same-store sales at about 5% a year and some improvement in margins which they've been able to do through things like adding refrigerators and freezers to their store, this is a company that can continue to pump out 20% earnings growth. if they can keep doing that, then the stock should continue to work higher. >> tom: enviable growth rate force retail especially with a retail their size. what about newsstar, nsr, ticker symbol. a telecommunications services company. if anybody changed mobile phone carriers and kept the same phone number, newsstar has a hand in there with number portability, right? >> news star provides the directories that manage virtually all the area codes, telephone numbers in the united states. these are through long-term
contracts with price risers in them. so the company has about 50% of their business that is contractually rising at about 10% a year. on top of that, they have some new areas of growth that are pretty exciting. they made an acquisition last year of a company called targis i.d. that has caller i.d. and customer data, as well as involvement in what some of the viewers may have heard of, a service called ultraviolet. many of the movie studios are behind this ultraviolet service. which you can think of as a digital walker to store-- locker to store data files, and access movies digitally. they are involved in that. and we think that's an exciting area for growth. >> tom: interesting play. 20 seconds left but i want to get to this unique energy play with kirby, kex, a barge operator. transportation for petroleum products instead of the oil or december il itself. >> well, kirby is very interesting play.
and they're really benefitting from solid fundamentals in their industry. they are running at almost full capacity as the largest inland tank barge operator in the united states. so pricing is very strong. and they're making money in a lot of different ways whether it's moving petroleum products from shale plays, moving chemical products, moving product to refineries, along the mississippi river. >> tom: dow have positions in these stocks yourself? >> i do own these positions through our mutual fund. >> tom: our friday market monitor, brian lazorishak. >> susie: and finally tonight, it's time for our friday feature-- "lou's been thinking" with author and educator lou heckler. tonight, lou's been thinking about his image. >> i've been thinking about being normal. i thought about all the times in my life when i didn't feel normal: when i was overweight as a kid; when i wasn't as athletic as my friends; even when i got drafted into the army at 22.
and realized i was one of the few recruits who had never before fired a weapon. at those ages it didn't occur to me that each of us was a unique character. instead i listened to that little guy inside my head saying, "blend in. be usual. do what everybody else is doing." in journalism school, i often sat next to jeff macnelly. jeff was tall and a bit gangly and seemed to spend every class doodling in his notebook. these weren't ordinary doodles. they were caricatures of the professor or slick drawings of a pretty girls a few rows away. i'm sure teachers must have told him to stop drawing and get down to doing something worthwhile. oh, and by the way that's the same jeff macnelly who before his far-too-early passing won three pulitzer prizes for editorial cartooning! if we could just open our arms a little wider and accept each persons normal as okay, wouldn't that create some kind of a shift? i'm not so naïve as to think it would make wars go away or stop politicians from slamming one another during heated campaigns, but it might do this: it might help more of us to feel whole, to feel at peace, to feel fulfilled.
isn't that normal? i'm lou heckler. >> susie: that's "nightly business report" for friday, february 17. i'm susie gharib. goodnight, everyone, and have a great weekend, you, too, tom. >> tom: good night, susie. i'm tom hudson goodnight everyone. we hope to see all of you again next week. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org